AFFECT OF RECESSION ON INDIAN BUSINESS

BY: Sec Q (PGDIB)

Rashmi Verma

RECESSION- MEANING
A RECESSION is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year. A RECESSION is also preceded by several quarters of slowing down. RECESSION is the result of reduction in the demand of products in the global market.

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National Bureau of Economic Research (NBER)

National Bureau of Economic Research (NBER) is the official agency in charge of declaring that the economy is in a state of recession. They define recession as : significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales
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Business Cycle

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CAUSES OF RECESSION
Currency crisis Energy crisis War Under consumption Overproduction Financial crisis Price of Fuels
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EFFECTS OF RECESSION
Bankruptcies Credit crunches Deflation (or disinflation) Foreclosures Unemployment

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GLOBAL RECESSION
It is rightly said that, when US sneezes the world catches the cold Economists at the International Monetary Fund (IMF) state that a global recession would take a slowdown in global growth to three percent or less. The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years.
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World Recession

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Causes of Recession in India

Indian companies have major outsourcing deals from the US

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Affects of recession on Indian business

The sectors least affected (directly) by the slowdown are Pharmaceuticals, Oil & Gas, FMCG, Media & Entertainment Those which will feel a moderate impact of the global crises are Power, Automobiles, Retail, Hospitality and Tourism The sectors most severely affected are Banks, Financial Services, Real Estate, Infrastructure and Information Technology
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Major sectors affected by Recession

Indian Stock Market IT and BPO Banking Real State Aviation Textile Automobile Hospitality
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TEXTILE

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Textile
'cottage industry' to the state of supremacy second largest employer in India, next to agriculture generates employment opportunities for approximately 33.17 million workers directly, and 54.85 million workers indirectly

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 60% of the total garments manufactured in India are exported to foreign markets like EU, US, and Japan, generating revenue of upto US$ 52 billion Economic slowdown in the US and EU has affected the textile business in India, resulting in a drastic decline in the country's garment exports almost 8, 00,000 garment and textile employees had lost their jobs

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 October 2008:the total output of the textile sector came down by 10% Punjab generating employment for 4,00,000 jobs has suffered a 50% loss in sales Majority of the layoffs target the daily-wagers

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 Dr P R Roy, President, The Textile Association of India (TAI), while discussing the reasons for slump in Industrial production, told Fibre2fashion, Slowdown in global economy is definitely affecting our textile industry. But, there is a lot of pessimism in the market regarding global recession, which instigates negative thinking among people. So without plotting their own position, the manufacturers have started cost cutting. This can be one of the many reasons for plunging industrial production.
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INDIAN BANKING SECTOR

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BANKING
banks are like backbone for industries They provide loans and capital to the business, industry, agriculture etc. Loss of profit and Capital of these banks bring serious threat to the economic development of that country

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 The present world recession has its roots in sub- prime crises The global banks and brokerages have had to write off estimated $ 512 billion in sub-prime losses

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 the banking system in India had no direct exposure to the subprime assets that triggered the crisis in the advanced economies the Reserve Bank had taken a number of measures which contributed to strengthening the resilience in the Indian banking system

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 Banks have suffered losses, including some public sector banks like Punjab National Bank, Bank of India, State Bank of India and Bank of Baroda as they had an exposure to the instruments issued by Lehman and Merrill Lynch.

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Reason for non failure of Indian banking system during recession

Traditional working of Indian Banks Strong base of nationalized bank Effective control of RBI Role of Finance Ministry

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INDIAN AVIATION INDUSTRY

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Indian Aviation Industry

The First Phase the Pioneering Years The Second Phase Public Sector Era The third Phase the Liberalization Era The Fourth Phase The Era of Growth and . . Recession (Fare Setting, Fare War and their Consequences)

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Aviation before recession

India aviation industry was expanding There were new budget airlines and private players The number of job opportunities in the industry was going up Students started signing up for courses like airline pilot's, flight attendant's, ground crew etc.
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Challenges after Recession

High Aviation Turbine Fuel (ATF) prices Rising labor costs Shortage of skilled labor Excess capacity Huge debt burden Intense price competition Job losses
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Indian Stock Market

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 Biggest falls in Indian stock

market history Worst hit stock Economic Growth in Advance nation had close to zero

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Bloodbath in Indian Stock Markets

Investors in Indian markets lost more than 16 trillion Rupees in just 2 days ! The ICUs of almost all city hospitals were full o The first lesson o The other big lesson o other learning which I hope will play out in the future

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AUTOMOBILE INDUSTRY

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Indian Automobile Industries

India is the world's largest two wheeler manufacturer. India is the world's second largest tractor manufacturer. India has the fourth largest car market in Asia. India has the world's largest three wheeler market. India is fourth largest Automobile exporter in the world.
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Effect On Automobile Company

TATA MOTORS MARUTI SUZUKI MAHINDRA & MAHINDRA

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Effect Of Recession
Uncertain exchange rate and a sudden increase in dollar value against Indian Rupee Delayed Payments from the OEMs (Original Equipment Manufacturer) Alloy and steel prices have also not shown any reduction in their prices

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INDIAN BPO AND IT INDUSTRY

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BPO CONTRIBUTION IN INDIA

India has revenues of 10.9 billion USD 30 billion USD from IT and total BPO 5-6% share of the total BPO Industry Employs more than 700,000 people 35 percent of the BPO market worldwide. Eastern Europe, Philippines, Morocco, Egypt and South Africa have emerged to take a share of the market market share of the offshore piece is expected to decline.
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Impact on BPO Industry

Indian IT and BPO companies to reduce their dependency to US start marketing their services to other countries like APAC Tier II IT and BPO companies wil merge with larger IT and BPO companies Indian outsource vendors will reduce hiring new employees
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What it means to India

Cost efficiencies and business transformation in companies will likely gain greater precedence than ever The resilient vendors can build new and differentiated offerings for companies India may benefit due to higher experience and maturity in these areas. Cash-starved companies may look to monetise their investments in captive operations HR outsourcing will provide remediation to some of the staff post
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CONCLUSION OF THE STUDY OF RECESSION & BPO

Existing contracts will continue Growth in the hard-hit will be limited sectors (especially BFSI). Sectors, not seeing much slowdown competition for the few available outsourcing contracts will be strong.

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